By James I. Ham, secretary, LACBA Professional Responsibility and Ethics Committee. Ham advises lawyers and law firms on ethics compliance, state bar disciplinary matters, and firm management. The opinions expressed are his own.

Would you like to reduce the stress of practicing law and upgrade the quality of your practice? If you implement these golden rules for successful and ethical law practice, you are almost certain to be less stressed, enjoy better client relationships, and run an ethically sound law practice in 2008.

1. Work off last quarter’s income, not next quarter’s income. Sustained financial difficulty leads to greater personal stress, poor partnership relations, and ethical lapses that only make matters worse. Undercapitalized law practices—big and small—habitually live off their next quarter’s income and drain their cash accounts at year end. Partners spend six months of the year stressed either by cash starvation or intense pressure to collect fees. Poor financial and partnership structures unnecessarily thrust this burden onto firm owners. Tighten your belt. Aim to operate off last quarter’s income rather than next quarter’s income. The payoff in reduced stress and increased financial flexibility and visibility is worth many times the short-term pain.

2. Obtain written agreements with partners and clients. Partnership disputes can be as nasty as the most salacious Hollywood divorce. Law firm “prenuptials” make sense. If the partnership dissolves, who gets what, and how is work in process handled? If you leave these questions to the partnership act, you may be surprised. Avoid the risks and problems that arise without a partnership agreement. The same goes for client relationships. The law requires written fee agreements in many cases. See, e.g., Cal. Bus. & Prof. Code Sections 6146-6149. Having a written fee agreement doesn’t guarantee payment or a happy client, but it offers protection in a litigious society. As fiduciaries, lawyers are given little slack. Fee agreements help identify potential conflicts of interest, satisfy statutory and ethical obligations, and offer some protection when a client complains.

3. Supervise your staff. Attorneys have a duty to supervise their staff. See Cal. R. of Prof’l Conduct R. 3-110(A). Lawyers are held responsible for staff indiscretions, including improper client trust fund accounting, violations of lawyer advertising rules, and improper conduct by private investigators. Put appropriate controls in place to ensure effective supervision.

4. Reject uneconomic cases. Every lawyer and every firm regardless of size must focus on client intake. Accepting engagements you are not competent to handle or that are too large, too small, or otherwise not economic, will almost certainly lead to problems and complaints. Carefully evaluate potential cases, make realistic assessments, and screen out problem cases before they turn into State Bar complaints. Don’t promise results you cannot deliver at prices that you (or the client) cannot afford. Control client expectations from the start. Decline cases that don’t make sense for your law practice.

5. Comply with applicable fee-splitting rules. Lawyers often refer or “joint venture” cases and split the attorney’s fee. The rules of ethics do not prohibit splitting a fee with another lawyer. The rules do, however, limit the total fee that can be charged and require written client consent to the fee split after full disclosure. See R. of Prof’l Conduct R. 2-200(A). Contract lawyers also must be compensated according to the fee-splitting rules. See Formal Op. No. 1994-138, State Bar of Cal. Standing Comm. on Prof’l Responsibility & Conduct; see also Chambers v. Kay (2002) 29 Cal. 4th 142, 149-50. A lawyer cannot split a legal fee with a nonlawyer and can only share fees with a client in very limited, specific circumstances, typically defined by statute. Lawyers who violate fee-splitting rules risk loss of their fee and prosecution by the State Bar. In some cases, undisclosed fee splits with clients or nonlawyer referral sources can lead to criminal prosecution.

6. Act as a fiduciary. Lawyers owe fiduciary duties to their clients. See, e.g., Fox v. Pollack (1986) 181 Cal. App. 3rd 954, 959-61; Day v. Rosenthal (1985) 170 Cal. App. 3d 1125, 1143. After the lawyer-client relationship is established, a lawyer is not free to enter into a business transaction with a client without complying with special rules requiring full disclosure and written client consent. See R. of Prof’l Conduct R. 3-300. Taking a security interest in client property or a lien on a client’s recovery may require compliance with Rule 3-300. Additionally, client funds must be accurately accounted for and properly handled in accordance with the State Bar’s trust account rules. See R. of Prof’l Conduct R. 4-100. A lawyer who withdraws from a representation must do so in a manner that avoids foreseeable client prejudice. See R. of Prof’l Conduct R. 3-700. Client files must be released upon client request, regardless of the status of the client’s bill. See R. of Prof’l Conduct R. 3-700(D). A lawyer also must protect the client’s secrets and maintain client confidentiality, even after the client’s matter is concluded. See Bus. & Prof. Code Section 6068(e).

7. Identify and avoid conflicts of interest. Representing multiple parties in the same case raises potential conflicts of interest, even where no actual conflict exists. Attorneys can represent conflicting interests only with all affected clients’ informed written consent after full disclosure. See R. of Prof’l Conduct R. 3-310. An attorney cannot take a position adverse to an existing or former client in a substantially related matter without proper disclosure and client consent. Lawyers who represent multiple personal injury victims, multiple partners individually, a company and some of its employees, or multiple clients in other situations must ensure they have identified and disclosed reasonably foreseeable potential or actual conflicts of interest, and comply with the obligation to avoid conflicts or obtain appropriate written consent from the affected clients.

8. Scrutinize your advertising. After being dormant for years, rules governing attorney advertising and multijurisdictional practice are receiving renewed attention, thanks mostly to the Internet and expanding multi-office law firms. Controversies have arisen regarding various attorney rating or ranking services and whether they are deceptive or misleading. States are enacting Internet advertising rules that may apply to out-of-state lawyers. The State Bar requires attorneys to keep copies of their advertising for two years. See R. of Prof’l Conduct R. 1-400(F). It is not only a smart but also necessary practice to properly review and inventory your advertising materials and ensure your compliance with the applicable rules.

9. Own up to mistakes. Mistakes happen. Lawyers are human. When you have made a mistake, own up to it, and take prompt steps to address the problem. Covering up a mistake or ignoring the problem (or a complaining client) is bound to make a potentially bad situation worse. Lawyers must report certain events to the State Bar, such as nondiscovery sanctions of $1,000 or more; the filing of three or more lawsuits alleging professional misconduct; the entry of a judgment for fraud, misrepresentation, breach of fiduciary duty, or gross negligence committed in a professional capacity; and where an attorney has been indicted or charged with a felony. See Bus. & Prof. Code Section 6068(o). Lawyers failing to report such events are subject to attorney discipline by the State Bar not only for the underlying offense but also for the failure to report.

10. Insist upon civility. You cannot necessarily control abrasive or rude opposing counsel, but you can control your behavior and that of lawyers working for you, your staff, and, yes, even your clients. Extreme rudeness or abrasiveness is bad for morale, fosters distrust, increases stress, leaves a terrible impression on clients and judges, and tarnishes your reputation. A lawyer or law firm’s most valuable asset is put at risk by bad behavior. If you need any proof, consider what business schools have long said about the importance of personality in the workplace. See Harry Levinson, The Abrasive Personality, Harv. Bus. Rev., May-June 1978. Practicing law is hard enough. Don’t make it more difficult on yourself by tolerating incivility in your own workplace.

By implementing these 10 simple principles, you will enjoy a more productive, more ethical, and more profitable law practice in 2008 and beyond.